Cleveland Federal Reserve President Loretta Mester emphasized the need for the central bank to move away from the constant speculation surrounding its decisions at each meeting. Mester, along with other Fed officials, believes that keeping interest rates at their current levels for an extended period is crucial in maintaining downward pressure on inflation.
To foster stability, Mester suggested putting an end to the ongoing guessing game about the duration of this phase. In a speech delivered to the Shadow Open Market Committee in New York, she stated that “allowing firms and financial markets to absorb the increases in the pipeline” would benefit from reducing uncertainties.
Mester did not provide specific details on how to eliminate these questions. However, back in 2012, former Chicago Fed President Charles Evans had outlined benchmarks that needed to be met before interest rates were raised. Whether or not the Fed will follow a similar approach remains uncertain.
While Mester indicated her support for another rate hike this year, she remarked that the central bank is nearing the end of its rate-hiking phase. As a voting member of the Fed’s interest-rate committee in 2024, she remains optimistic about the progress made in curbing inflation. Mester also expects economic growth to slow down and the labor market to cool off.
According to reports from bankers in her district, consumers are increasingly relying on home equity lines of credit and credit cards for spending. However, Mester believes that as savings balances return to normal and credit conditions remain restrictive, consumer spending will moderate.
As of now, stock markets, including the DJIA SPX, have experienced a decline in early afternoon trading. Additionally, the yield on the 10-year Treasury note BX:TMUBMUSD10Y has slipped just below 5%.